- The Washington Times - Tuesday, April 20, 2010

ANALYSIS/OPINION:

Forty-four percent of America’s unemployed have been jobless for more than six months. That’s the highest rate since the Great Depression. The previous high was 26 percent in June 1983. No matter what the White House says, an economic recovery has not arrived.

On Friday, President Obama signed a new law to maintain unemployment insurance benefits for the chronically unemployed for up to 95 or 99 weeks. Eligibility for 99 weeks applies when a state’s unemployment rate is more than 8.5 percent. That’s almost two whole years, which represents a huge increase compared to the maximum 26 weeks that were available as recently as June 2008. For perspective, between 1954 and 2007, the national average maximum duration for unemployment insurance ranged from a low of 22.8 weeks in 1954 to a high of 27.2 weeks during most of the 1970s.

The level of the benefits is unprecedented, too. Weekly unemployment insurance payments are the highest ever, and government additionally pays for most health insurance for the unemployed.

The liberal assumption is that long-term unemployment shows the need for longer benefits, but economists see a different trend: Historically, long and generous benefits are the cause, not the cure, for long-term jobless rates. The more something is subsidized, the more of it you get. People only receive benefits as long as they are unemployed. In the past, one way people got back into the labor force was by taking a part-time job, but now this means forfeiting unemployment checks as well as subsidies to buy health insurance. For many, part-time work worsens their circumstances more than no work at all.

Most of the unemployed wait until benefits are about to run out before taking another job. About one-third of those receiving unemployment insurance find work right after their benefits run out. This trend occurs whether unemployment is high or low. Extending benefits simply delays job-seeking. In the current case, the percentage of the unemployed who have been jobless for more than six months increased right after the length of the benefits first increased in July 2008, and then again after the stimulus increased unemployment benefits in March 2009.

From January through June 2008, the percentage of unemployed who had been out of a job for more than six months remained virtually unchanged. However, as soon as the unemployment benefits were increased to 39 weeks, the percentage of those unemployed long term immediately started rising. Long-term unemployment during this recession is uniquely bad because of government policies that discourage job-taking.

President Obama and congressional Democrats need to explain why they are persisting with policies that have contributed to the creation of so much unemployment. The stimulus created massive havoc in labor markets by moving money from where people would have spent it to where the Democrats wanted it spent. This moved jobs from one sector to another along with the money, which raises unemployment as workers move between jobs. Now the massive increase in unemployment insurance benefits is ensuring that people stay unemployed for longer periods of time.

One uncomfortable reality is that a deeper and darker crisis gives the president more opportunity to ram through leftist policies to remake the American economy into a more European socialist model. Such strategy is not pie in the sky. In November 2008, Rahm Emanuel, Mr. Obama’s chief of staff, announced: “Rule one: Never allow a crisis to go to waste. They are opportunities to do big things.” Rule two might be to create a crisis where none would have existed.


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